Employees were shown a sample of their company's core health and safety documents and assessed as to how much of the content they could understand.
The majority - 65 per cent overall and 70 per cent in manufacturing sector - did not fully understand their employers' policies and rules, hazard information, and safety procedures.
Eighty per cent of employees could not accurately complete a hazard report form, according to the study findings.
Health and safety documents were consistently complex and used indirect and specialist language which many employees were unfamiliar with, researchers said.
The presence of jargon caused even greater difficulties for employees with English as a second language.
Katherine Percy, head of Workbase, said the findings had serious implications for workplace safety.
"The study suggests that employers could be doing more to ensure that employees understand the specific health and safety processes and policies that they are expected to follow," Percy said.
"It is difficult - if not impossible - to engage employees in health and safety if they can't understand the information they are being given."
Workbase found many companies had modelled their health and safety documents on the formal language used in official government documents.
The study found nearly 20 per cent of supervisors also struggled with health and safety paperwork, making it hard for them to communicate the information to employees.
Peter Bateman, editor of Safeguard magazine, said many companies were wasting their time writing long health and safety documents.
"If it's too long it simply won't be read by anyone - it's going to gather dust in the corner."
Requiring employees to fill in lengthy incident report forms was also counter-productive, he said.
"A very short and simple one is sufficient. The important thing is to record the fact that something has happened and get it to someone who can do something about it. That could be to a union representative or a middle manager."
Bateman said the key was to train people to do their job effectively and safely in whichever way best suited the company's workforce.
That could mean using visual or verbal training methods rather than just through written words.
"Good training should not be heavily text-based."
Percy said Workbase's study backed up findings by the Ministry of Business Innovation and Employment's recent Independent Taskforce Report on Workplace Health and Safety, which identified low literacy and poor communication skills as being a problem.
To reduce New Zealand's workplace accident and death rates, a higher priority must be placed on making documentation easier for employees to understand, Percy said.
"More resource also needs to be put into developing training that develops employees' health and safety-related vocabulary, literacy, knowledge and skills."
WorkSafe New Zealand, which is expected to be in place by December this year, was a key recommendation of both the Royal Commission on the Pike River Coal Mine Tragedy and the Independent Taskforce on Workplace Health and Safety.
The body will work closely with employers and employees to improve workplace health and safety practice and enforce regulations.
